S

tate-controlled mining company PT Bukit Asam is still seeing pressure on its business as cost cutting measures and increases in production cannot offset the decline in commodity prices.

President director Milawarma said Bukit Asam'€™s selling price kept falling around 3 to 4 percent during the January-May period this year, compared with the same period last year.

'€œOur production volume is around 6 percent higher and sales volume is 5 percent higher. However, overall cost also rose around 9 percent,'€ Milawarma said.

Poor performance would likely continue throughout the year, he added.

Bukit Asam is targeting to sell 24 million tons of coal by the end of the year, increasing by around 33 percent compared to last year.

Coal miners are currently suffering from a low selling price apparently because of oversupply in the market as producers continue producing while demand '€” particularly in China '€” is weakening due to slowing economic growth.

The benchmark Newcastle thermal coal was around US$57 per ton at the end of May, according to figures from Reuters. The price dropped 11 percent this year and is already less than a half of a peak level of around $130 per ton in 2011.

Meanwhile, the country'€™s Energy and Mineral Resources Ministry mineral and coal office set the Indonesian coal reference price (HBA) at $59.59 per ton for June, which is 2.4 percent lower compared to $61.08 in May. On a year-on-year (yoy) basis, the June HBA price is 19 percent lower compared to $73.64 per ton in June 2014.

As the global coal price keeps declining, Bukit Asam and all coal miners in the country are struggling to maintain their operations. The coal companies are taking various measures to cut costs, such as lowering the stripping ratio '€” which is the ratio of volume of waste material that must be removed to get the coal '€” to maintain their profit.

Many miners are also pumping out production volume to balance the lower price.

During the Coaltrans Asia conference early this month, some industry players said Indonesian coal miners had limited ability to reduce costs further.

Milawarma meanwhile said big mining companies would likely continue reducing their costs and raising output.

'€œMedium and low-level players might have limited space for further cost reductions. However, big miners would still try to increase their volume so that they could reduce the cost per ton of coal,'€ he said.

Indonesian Coal Mining Association (APBI) chairman Pandu Sjahrir earlier said that around 50 to 60 percent of mining firms in the country were selling coal below their cash costs.

'€œIt means that the more they produce, the more they are losing,'€ Pandu said.

Bukit Asam, whose shares are traded on the Indonesia Stock Exchange (IDX) under PTBA, reported poor financial performance in the first quarter of the year due to falling coal prices.

The company booked a 36.5 percent drop in net profits in the January-March period of this year compared to the same period last year.

Shares in PTBA were selling for Rp 9,350 a piece at 2:31 p.m. Jakarta time, increasing by 1.08 percent from a day earlier.